House Subcommittee Holds Hearing on Banking Access for Cannabis-Related Businesses

WASHINGTON, DC – On February 13, The House Subcommittee on Consumer Protection and Financial Institutions held a hearing entitled “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.”

Witnesses included:

Rep. Ed Perlmutter (CO-07);

the Honorable Fiona Ma, California State Treasurer;

Maj. Neill Franklin (Ret.) of the Baltimore City and Maryland State Police Departments, currently the Executive Director of Law Enforcement Action Partnership (LEAP);

Mr. Gregory S. Deckard, President, CEO, and Chairman of State Bank Northwest, on behalf of the Independent Community Bankers of America (ICBA);

Mr. Corey Barnette, the owner of District Growers Cultivation Center and the medical cannabis dispensary Metropolitan Wellness Center; and

Mr. Jonathan H. Talcott, Chairman of the Board of Smart Approaches to Marijuana.

Twenty-three years have passed since California became the first state to legalize cannabis for medicinal purposes in 1996.

Today, the adult use of cannabis is legal in 10 states and the District of Columbia. Thirty-three states and DC have created comprehensive medical cannabis programs, and 14 additional states have created more limited medical cannabis programs or protections.

Three out of five U.S. territories have passed legislation to create comprehensive medical cannabis programs, and a fourth passed legislation to allow the adult use of cannabis with special protections and provisions for medical cannabis patients.

Since the Federal government classifies cannabis as a Schedule I controlled substance, the cannabis industry has had to develop in the face of Federal hostility, which has included a lack of access to traditional banking solutions. “Federal drug laws and bank regulations have not evolved to reflect this new reality at the state and city level,” noted Subcommittee Chair Gregory Meeks (NY-05). “The absence of a broader permanent regulatory framework continues to keep nearly all banks out of this growing industry despite a clear interest,” he continued.

When cannabis-related businesses cannot access traditional banking services, they generally must operate on an all-cash basis. In addition to making it very difficult for cannabis-related businesses to operate, this creates an enormous security risk because these businesses become such attractive targets to robbers.

The consequences are predictable and tragic: not only have robberies occurred at a staggering pace, but employees, private security guards, and would-be robbers have been killed in separate incidents around the country.

For many patients with mobility issues or serious illness, every trip outside of the home entails risk and must be carefully planned. When patients cannot acquire their medicine without cash, they must plan a trip to a bank or ATM before going to a dispensary.

Some jurisdictions allow cannabis delivery, but patients would still need to have cash on hand with which to pay the delivery driver.

Giving cannabis-related businesses access to traditional banking services would enable cashless and online sales, which would facilitate patients’ use of delivery services and increase delivery drivers’ safety by reducing their cash on hand. Therefore, access to banking services for cannabis-related businesses would reduce the burden on, and barriers to access for, people with mobility issues or serious illness.

The Obama Administration recognized the need to allow some form of access to banking services for cannabis-related businesses but could not unilaterally change Federal law in that regard. Instead, the Administration released guidance through the Financial Crimes Enforcement Network on February 14, 2014 that described how financial institutions might do business with these entities without being prosecuted under the law.

Given, however, that the guidance is non-binding and doesn’t carry the force of law, relatively few financial institutions have begun servicing cannabis-related businesses since the guidance was issued.

As of September 30, 2018, only 486 financial institutions are providing banking services for cannabis-related businesses in the United States. Remarked Rep. Perlmutter (CO-07):

“We need these marijuana-related business and employees to have access to our banking system. It will improve transparency and accountability and help law enforcement root out illegal transactions to prevent tax evasion, money laundering, and other white-collar crime. Most importantly though, it will help reduce the risk of violent crime in our communities”

[This] historic hearing provides a forum for a long-overdue discussion about changing Federal laws to allow cannabis-related businesses to use banking services. Americans for Safe Access is encouraged that the 116th Congress is taking up this issue and is strongly in favor of the principles laid out in the draft of the SAFE Banking Act of 2019.

“Access to banking is an important step in making medical cannabis accessible to those who need it. Laying the groundwork of basic financial services allows patients to buy their medicine through legitimate businesses that test and appropriately package products rather than through the black market. Upon approval of banking legislation, the logical next step for the Financial Services Committee is to have a hearing on the potential insurance coverage of medical cannabis,” said David Mangone, Director of Government Affairs at Americans for Safe Access.

With over 100,000 active members in all 50 states, Americans for Safe Access is the largest national organization of patients, medical cannabis providers, medical professionals, scientists, and concerned citizens promoting safe and legal access to cannabis for therapeutic use and research. Americans for Safe Access submitted written testimony to members of the House Subcommittee on Consumer Protection and Financial Institutions in preparation for this hearing.

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